Gold prices soared to a new record high during Monday’s trading session (September 16th) as investors increased their bets on the likelihood of a more significant rate cut by the US Federal Reserve when its meeting concludes this week. A prominent bank highlighted five crucial supportive factors for gold prices and stated that it has substantially increased its allocation to this precious metal.
At the close of the New York market, spot gold prices rose by $8.3/oz compared to last week’s close, equivalent to a 0.32% increase, reaching $2,587/oz, according to data from the Kitco exchange.
As of 7 a.m. Vietnam time on September 17th, spot gold prices had increased by $0.2/oz compared to the US session close, trading at $2,587.2/oz. Converted at Vietcombank’s selling exchange rate, this price is equivalent to approximately 77.05 million VND per tael, an increase of 105,000 VND per tael compared to yesterday’s morning price.
Spot gold prices are inching closer to the crucial technical resistance level of $2,600/oz, while gold futures prices surpassed this milestone last Friday.
The precious metals market is being propelled by a weakening US dollar and expectations of a 0.5 percentage point rate cut by the Fed in the first reduction of the expected easing cycle, which is anticipated to commence on Wednesday.
The Fed’s periodic monetary policy meeting will begin on Tuesday and conclude on Wednesday with a statement from the Federal Open Market Committee (FOMC) and a press conference by Fed Chairman Jerome Powell. The Fed’s federal funds rate is currently at 5.25-5.5%. According to data from the CME exchange’s FedWatch Tool, the market is betting on a 62% chance that the Fed will cut rates by 0.5 percentage points in this meeting. The likelihood of a 0.25 percentage point reduction has diminished significantly to 38%.
The Dollar Index, which measures the strength of the US dollar against a basket of six other major currencies, closed the first trading day of the week at 100.76, down from Friday’s level of around 101. This morning, the index continued its downward trend, falling to 100.7.
Gold is a non-interest-bearing asset priced in US dollars, so the prospects of lower interest rates and a weaker dollar provide a “double boost” to gold prices.
“The market is reflecting the possibility of a half-point rate cut by the Fed. That’s why gold prices are so high. I think gold prices will fall if the Fed only cuts rates by a quarter point,” said Phillip Streible, chief strategist at Blue Line Futures, in an interview with CNBC.
In a conversation with Bloomberg, Ole Hansen, head of strategy at Saxo Bank, suggested that the magnitude of the Fed’s rate cut will significantly influence gold prices in the short term. The Fed’s decision “could send a strong signal” about how monetary policymakers “view the current economic outlook.”
A report from Societe Generale (SocGen) identified five factors that the bank believes are primarily driving gold prices. These factors include: geopolitical tensions, USD exchange rates and interest rates, central bank gold purchases, individual investor demand, and fundamental economic factors. SocGen analysts emphasized that each of these factors is currently very positive for gold prices but warned that most of them have already been reflected in the price.
Therefore, the question now is, “How much higher can gold prices go?” the report asked. However, SocGen remains optimistic about the gold price outlook, stating that it has allocated 100% of its basic commodities market funds to gold, and this precious metal accounts for 7% of SocGen’s asset allocation for Q3, a 40% increase from the previous quarter.
The report predicts that spot gold prices will average $2,700/oz in Q4 2024 before rising to $2,725/oz in Q1 2025 and $2,750/oz in Q2 2025. For the full year 2025, SocGen forecasts an average gold price of $2,800/oz.
“We forecast gold prices to reach $2,700/oz in the short term and $2,900/oz by the end of 2025,” ANZ analysts said.
Anticipating Fed’s Move, Gold Prices Surge
The global gold price soared to a record high on September 16, propelled by a weakened US dollar and expectations of a significant Fed rate cut this week.
Gold Prices Surge to Record Highs
The global gold price surged to an all-time high on the morning of September 17, reaching a staggering peak of $2,589 per ounce.
